Auditors report on the consistency of application of accounting principles. Assume that the following list describes changes that have a material effect on a clients financial statements for the current year. Required: For each of the following situations, state whether the audit report should include an emphasis-of-matter (explanatory) paragraph on consistency.

Return to ques 15 Auditors report on the consistency of application of accounting principles. Assume that the following list describes changes that have a material effect on a client's financial statements for the current year. 2.47 Dolnts Required: For each of the following situations, state whether the audit report should include an emphasis-of-matter (explanatory) paragraph on consistency. Answer is complete and correct. Item No. Situation Emphasis-of-Matter Paragraph on Consistency Added? (1) A change from the completed-contract method to the percentage-of-completion method of accounting for long-term construction contracts. Yes (2) A change in the estimated service lives of previously recorded plant assets based on newly acquired information No (3) Correction of a mathematical error in inventory pricing made in a prior period. Yes A change from direct costing to full absorption costing for inventory valuation. Yes (5) A change from deferring and amortizing preproduction costs to recording such costs as an expense when incurred because future benefits of the costs have become doubtful. The new accounting method was adopted in recognition of the change in estimated future benefits. Yes (6) A change to including the employer's share of FICA taxes as "Retirement benefits" on the income statement. This information was previously included with "Other taxes. No (7) A change from the FIFO method of inventory pricing to the LIFO method of inventory pricing. Yes